Changing the Rules on Rulemaking

2011 Wisconsin Act 21 significantly changes how administrative rules are promulgated. Among other things, it narrows state agencies’ rule-making authority, gives the governor new powers to approve or prevent the adoption of rules, expands the economic-impact-analysis requirement to all agencies, and expands venue in declaratory judgment actions to all counties.

For nearly 60 years, the Wisconsin Legislature has engaged in efforts to regulate, and sometimes limit, the ability of state agencies to promulgate administrative rules. This article summarizes the major changes made to this process by 2011 Wisconsin Act 21, the latest legislative activity in this area. The Act took effect on June 8, 2011.

Agency Decision to Promulgate

Before Act 21. Prior to Act 21, Wisconsin law required an agency to promulgate as a rule each general policy statement and each interpretation of a statute that it specifically adopted to govern the agency’s enforcement or administration of that statute. A mere statement of policy or interpretation of a statute made in an agency decision in a particular matter with a specific set of facts did not make the statement or interpretation a “rule” and did not require rule promulgation.1 Further, an agency had to promulgate a general interpretation of a statute enforced or administered by it as a rule if the agency considered it necessary to effectuate the purpose of the statute and if the rule did not exceed the bounds of correct interpretation.2 Finally, under the classic judicial statement regarding an agency’s authority to promulgate a rule, an agency had only those powers that are expressly conferred or necessarily implied by the statutes; any reasonable doubt concerning the existence of an implied power of an agency would be resolved against the exercise of such authority.3

After Act 21. Act 21 appears to proscribe an agency’s authority to act in a number of ways. For example, an agency may not impose any standard, requirement, or threshold, in a rule or a license condition, unless the standard, requirement, or threshold is explicitly required or permitted by statute or by another properly promulgated rule. Next, an agency may not find rule-making authority in a legislative statement of intent, purpose, findings, or policy or in a statutory provision describing the agency’s general powers or duties; the agency is limited to authority that is explicitly conferred by the Legislature. The latter provisions may be a legislative attempt to instruct courts to no longer divine agency rule-making authority from the necessary implications of a statutory scheme, although it would be difficult for a court to avoid analyzing the necessary implications of a statute in the face of a broad grant of authority to an agency. Finally, with respect to a specific standard, requirement, or threshold, the Act provides that an agency may not promulgate a rule that is more restrictive than a statute.4

Scope Statement

Before Act 21. Prior to Act 21, Wisconsin law required an agency to prepare, and publish in the Wisconsin Administrative Register, a statement of the scope of any rule it planned to promulgate. The statement would include a discussion of existing and proposed law, statutory authority for the rule, an estimate of all resources necessary to develop the rule, and a description of the entities the rule might affect. No rule drafting was allowed to take place until the scope statement was approved by the person or body leading the agency. However, the scope-statement requirement did not apply to adoption of emergency rules, which, in general, took effect without pre-promulgation review when they were published in the official state newspaper.5

After Act 21. Act 21 provides that rule drafting and publication of a scope statement may not occur unless the governor (not just the agency) approves the scope statement. An agency also must prepare a scope statement, in accordance with statutory requirements, before adopting an emergency rule. The Act also clarifies that if an agency later changes the scope of a proposed rule in any meaningful or measurable way, including the addition in the proposed rule of any activity, business, material, or product not specifically found in the original scope statement, the agency must prepare, and obtain approval of, a new scope statement.6

Submitting Proposed Rules to Wisconsin Legislative Council

The Wisconsin Legislative Council, a nonpartisan legislative service agency, acts as an administrative-rules clearinghouse. Act 21 makes no change to the requirement that an agency must submit a proposed rule to the rules clearinghouse for review of, among other things, form, style, and technical adequacy. The Legislative Council staff considers whether statutory authority exists for the agency to adopt the proposed rule and whether the text of the proposed rule is clear and uses plain language. Commentary about a proposed rule is not accepted from interested parties and, thus, this step in the rule-making process is not a point of access for proponents or opponents of a rule proposal.7

Public Hearing

Act 21 makes no change to the requirement that an agency generally is required to hold a public hearing on a proposed rule before the rule may have the force and effect of law. Limited exceptions to the public hearing requirement exist for a proposed rule bringing an existing rule into conformity with a statute or with a controlling judicial decision, for the adoption of an emergency rule, and for a proposed rule for which a petition for hearing had not been made by specified parties within 30 days of publication of notice in the Wisconsin Administrative Register.8 The rule-making hearing is of a quasi-legislative variety. However, judicial review of legislative actions and agency actions differs. For legislative actions, courts may presume factual bases exist to support relationships between enactments and legitimate governmental purposes. But for agency rulemaking, the Wisconsin Supreme Court has held, facts of record must exist to demonstrate a reasonable basis for an agency’s rule.9

Ronald Sklansky,U.W. 1975, recently retired as a senior staff attorney for the Wisconsin Legislative Council, a nonpartisan service agency of the Wisconsin Legislature. Among other duties, he served for more than 30 years as the staff counsel to the Legislature’s Joint Committee for Review of Administrative Rules and as the director of the Wisconsin Legislative Council’s Administrative Rules Clearinghouse.

Economic Impact Report

Before Act 21. Prior to Act 21, Wisconsin law required the Department of Administration (DOA) to direct one of five agencies to prepare an economic-impact report regarding a proposed rule if 1) an appropriate petition for that purpose was submitted to the DOA; and 2) the proposed rule would cost affected persons at least $20 million during each of the first five years after the rule’s implementation to comply with the rule, or the rule would adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities. In the absence of these conditions, the DOA could, at its own discretion, order the preparation of an economic-impact report. The economic-impact report was to be completed before submitting the rule to the Legislature. The five agencies affected by this requirement were the Departments of Agriculture, Trade, and Consumer Protection; Commerce; Natural Resources; Transportation; and Workforce Development. The economic-impact report requirement did not apply to the adoption of an emergency rule.10

The pre-Act 21 economic-impact report had to contain information concerning a proposed rule’s effect on specific businesses, business sectors, and the state’s economy. An economic-impact report was required to include an analysis and quantification of the problem addressed by the rule, an analysis and quantification of the rule’s economic impact, and an analysis of the rule’s benefits.11

Finally, the pre-Act 21 statutory scheme required the DOA to review a proposed rule for which an economic-impact report was prepared and to issue its own report. The purpose of this review was to determine that the economic-impact report had documentary support, statutory authority existed for the rule, and the rule was consistent with, and not duplicative of, existing law. If conflicts arose between the DOA and the rule-proposing agency, the DOA could prevent the promulgation of the rule until the conflicts were resolved. The DOA’s review was not subject to judicial review.12

After Act 21. Act 21 makes extensive changes to these provisions, including changing the name of the economic-impact report to an economic-impact analysis. Every state agency, not just the five listed above, must prepare an analysis for each proposed rule, before the rule’s submission to the Wisconsin Legislative Council, without requiring a petition for an analysis by interested parties and without regard to the fiscal impact of the proposed rule.13

In addition to including the pre-Act 21 features, the agency in its analysis must consider the economic effect of a proposed rule on public utility ratepayers and local governmental units, gather information from associations representing businesses and from local units of government, and coordinate with affected local units of government. The analysis now must include:

a comparison with approaches taken by the federal government and adjacent states and, if the agency takes a different approach, a statement explaining why the different approach is taken;

a quantification of implementation and compliance costs that will be passed along to affected parties;

an analysis of the actual and quantifiable benefits of the proposed rule and an analysis of how effective the proposed rule will be;

an analysis of alternatives; and

a determination made in consultation with affected businesses, local governmental units, and individuals as to whether the proposed rule will adversely affect in a material way the economy, a sector of the economy, productivity, jobs, or the overall economic competitiveness of Wisconsin.

The amended statute no longer refers to an analysis of risks to public health and the environment. If a proposed rule is modified so that its impact is significantly changed, the agency must prepare a revised analysis that must “be submitted in the same manner as an original economic impact analysis is … submitted.”14

Finally, Act 21 provides that the DOA will only review a proposed rule as described under prior law if the analysis indicates that at least $20 million in implementation and compliance costs are reasonably expected to be incurred by or passed along to businesses, local governmental units, and individuals. Also, the Act repeals the provision that no person was entitled to judicial review of the DOA’s actions regarding the review of the economic-impact report.15

Submitting a Proposed Rule to the Legislature

Before Act 21. Prior to Act 21, Wisconsin law required an agency to submit a proposed rule, along with a report on the rule, to the chief clerk of each house of the Legislature when the rule was in final draft form. The presiding officer of each house of the Legislature was then, within 10 working days of the submission, to refer the proposed rule to one standing committee. A submission received on or after Sept. 1 of an even-numbered year was considered received on the first day of the next regular session of the Legislature. The agency report had to contain numerous items, including 1) agency conclusions and recommendations demonstrating the need for the rule and the rule’s reasonableness, 2) a copy of the Wisconsin Legislative Council rules clearinghouse report, 3) explanations of modifications made in the rule as a result of the clearinghouse report and as a result of testimony at a public hearing, and 4) a list of persons who appeared or registered for or against the rule at a public hearing.16

After Act 21. Act 21 mandates that an agency may not submit a proposed rule to the Legislature for review unless the governor has approved the proposed rule in writing. As a result of the governor’s new authority to withhold approval of a scope statement, the governor’s office will become the focus of parties’ efforts to block the promulgation of, or significantly modify, a proposed rule. However, one question that may be litigated in the future is whether, through the rule-making process, the governor has the authority to impede activities of another constitutional officer, such as the superintendent of public instruction, who has independent constitutional authority and responsibility.17

In terms of the time for review, Act 21 provides a presumptive standard that a rule must be submitted to the Legislature no later than the last day of the final general-business floor period, rather than the pre-Act 21 date of Aug. 31 of an even-numbered year. The final floor period usually occurs in March or April of an even-numbered year. However, the presiding officers of the houses may refer a “late” submission of a proposed rule to standing committees, and the committee review periods will extend to the date that the next Legislature convenes.18

Legislative Review of Proposed Rule

Before Act 21. Previously, when a standing committee in each house of the Legislature received a proposed rule referral, the review period for each committee generally extended for no more than 60 days. Within that period, each committee could 1) take no action and allow the agency to continue with promulgation, 2) enter into an agreement with the agency to make modifications in the rule, or 3) object in whole or in part to the rule. In case of a rule-modification agreement, the period for review for both committees was extended for 10 working days following receipt by the committees of the modified proposed rule. If either committee objected to a rule, the objection was referred to the Joint Committee for the Review of Administrative Rules (JCRAR) for further action. The joint committee could take, in substance, the same actions that a standing committee could take – no action; modification agreement; or objection. If the JCRAR objected to a rule, it had to introduce, in each house of the Legislature, a bill that, if enacted into law, would sustain its objection and prevent the promulgation of the rule. If both bills were defeated or failed in any other manner to be enacted, the agency could proceed with the rule’s promulgation.19

After Act 21. Act 21, in addition to clarifying a number of timing issues with respect to beginning and ending of committee review periods, makes a significant departure in the law by expanding the jurisdiction of the JCRAR. In addition to the pre-Act 21 requirement that the joint committee must review a proposed rule that has received an objection by a standing committee, the Act provides that all proposed rules must be referred to the JCRAR. An agency may not promulgate a rule until 1) the JCRARnonconcurs in an objection, concurs in a standing committee approval, otherwise approves of a proposed rule, or waives its jurisdiction; 2) the JCRAR review period expires in the case of a rule that has not received a standing committee objection; or 3) following a JCRAR objection, a bill introduced to sustain the objection is not enacted.20

Placement of Rule in Administrative Code

Act 21 makes no changes to statutory provisions requiring an agency to file a certified copy of a rule with the Legislative Reference Bureau. The bureau must publish a properly filed rule in the Wisconsin Administrative Register and the Wisconsin Administrative Code.21

Additional Items

Act 21 newly provides that an agency may not adopt an emergency rule without the governor’s written approval.22

The Act also amends the law regarding venue in an action for a declaratory judgment as to the validity of an administrative rule. Before Act 21, such an action generally would be brought in Dane County. Act 21 provides that venue will be in the circuit court for the county in which the party asserting the invalidity of the rule resides or has its principal place of business or, if that party is a nonresident or does not have its principal place of business in Wisconsin, in the circuit court in which the dispute arose.23

Conclusion

Act 21 represents another step in the quest of elected officials to jealously guard their constitutional policy-making authority in the face of unelected state agency personnel who promulgate administrative rules having the force and effect of law. This goal underlies the Act’s provisions that narrow the rule-making authority of state agencies; give the governor the power to withhold approval of a scope statement, to prevent the adoption of an emergency rule, and to prevent the submission of a proposed rule to the Legislature; impose an expanded economic-impact analysis on all state agencies so that the need for any given rule is proved to the Legislature; expand the role of the JCRAR to extend its review jurisdiction to all proposed administrative rules; and expand venue, in an action for declaratory judgment as to the validity of an administrative rule, from Dane County to all Wisconsin counties.

As a consequence of the Act’s amendments to the rule-making process, new avenues have been created for an interested party to affect the final outcome of a properly promulgated administrative rule. For example, an advocate who is opposed to a policy emanating from an agency may attempt to block the initial drafting of an administrative rule by asking the governor to withhold approval of an agency scope statement or by asking the governor to withhold approval of the proposed rule’s submission to the Legislature. An advocate also may affect a final rule by insisting that an agency’s economic-impact analysis fully take into account all the concerns of statutorily named interested parties, including the business community and local governments. If an advocate is dissatisfied with the review of a proposed administrative rule afforded by the standing committees of the Legislature, the advocate now may approach the JCRAR for further review. Finally, Act 21 reduces the burden in seeking a declaratory judgment to invalidate a rule by expanding the venue for such a proceeding from Dane County to every county in the state; a litigant in Bayfield County, for example, will no longer need to spend the money and time needed to travel to Madison if he or she wants to challenge the validity of an administrative rule.

By making the rule-making process more rigorous, another important result of Act 21 may be a reduction in the number of rules ultimately promulgated by state agencies. Only future state agency activities will determine whether this will occur and whether the overall quality of administrative rule making is improved by Act 21.